Stan Wong is director of wealth management and portfolio manager at Stan Wong Private Wealth Management, ScotiaMcLeod. His focus is on North American large caps and ETFs.
Adidas AG is well-positioned to capitalize on the economic recovery in Europe and the upcoming FIFA World Cup (one of the world's most widely viewed sporting events). Adidas shares have come under pressure recently due to the company's exposure to emerging markets and related currency issues. This price weakness has presented an attractive buying opportunity given Adidas' strong balance sheet, current valuation discount and expected 15-per-cent earnings growth profile.
Gilead Sciences Inc.
Gilead Sciences is the world's largest biopharmaceutical company. The company's primary areas of focus include HIV/AIDS, liver disease and serious cardiovascular and respiratory conditions. Gilead's blockbuster hepatitis C drug, Sovaldi, is expected to contribute tremendous revenue and earnings growth for the company. Gilead has an expected long-term earnings growth rate of over 25 per cent and a forward price-earnings multiple of 18x, giving the stock a compelling 0.7x PEG ratio. Indeed, the recent share price weakness presents a very solid buying opportunity.
Recent price weakness in MasterCard shares has presented a compelling buying opportunity. Longer-term, MasterCard should benefit from a secular trend favouring electronic payments over cash and cheques. MasterCard continues to invest in growth initiatives within the payments space, including e-commerce, mobile payments and prepaid cards. The company's greater exposure to the faster growing international markets should also be beneficial to the share price, allowing for an expected 15-20-per-cent earnings growth rate. Near-term, the continuation of the current global economic recovery should lead to an acceleration of consumer spending and further revenue growth for MasterCard.
Past Picks: March 14, 2013
Then: $21.90; Now: $16.59 -24.25%; Total return: -24.25%
Wal-Mart Stores Inc.
Then: $73.22; Now: $77.97 +6.49%; Total return: +9.11%
Then: $57.68; Now: $72.48 +25.66; Total return: +27.32%
Total return average: +4.06%
Equity markets appear to be getting fatigued as investors contend with higher stock valuations, negative seasonality tendencies and lingering geopolitical concerns. Near-term, volatility is likely heading higher with equities expected to be range bound. However, we continue to maintain that equities offer better value than bonds and suggest that periods of market weakness be seen as opportunities to selectively add to stock exposures. An improving global economy bodes well for corporate earnings and should provide support for the stock market to grind higher. In our portfolio allocation, more economically-sensitive cyclical stocks are favoured over defensive stocks while U.S. and European equities continue to look more attractive compared to Canadian equities. Of course, individual stock and sector selection will be crucial given that the broader North American equity market indexes appear fully valued.
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